Budget 2026: Rename Advance Tax to Estimated Tax under the Income Tax Act, 2025, suggests ICAI

One of the key suggestions relates to the renaming of advance tax. As stated in the memorandum:

“Advance tax to be referred to as ‘estimated tax’. Consequent to moving from ‘assessment year’/‘previous year’ to ‘tax year’, the term ‘advance tax’ may be referred to as ‘estimated tax’.”

The recommendation comes in view of the new framework, which replaces the traditional “assessment year” and “previous year” with a unified tax year. Under this system, taxpayers pay tax based on estimates of income for the same year, making the term “estimated tax” more precise than the historical term “advance tax.” ICAI emphasises that this change is terminological, with no impact on payment timelines or liability, but it is expected to improve clarity and reduce ambiguity.

Meanwhile, ICAI has also proposed the introduction of an optional joint taxation scheme for married couples. In this mechanism, both husband and wife would be able to claim the standard deduction separately on their respective salary incomes, provided both are salaried, thereby potentially lowering overall tax liability.

• Exclusion of Futures and Options (F&O) trading and speculation business from the scope of presumptive taxation.

• Mandatory audits for cases claiming profit-linked deductions to ensure compliance.

• Introduction of a year-wise e-ledger to track TDS, TCS, and estimated tax payments.

• Simplification of return processing, limiting scrutiny to arithmetical errors or prima facie incorrect claims.

• Clarifications on surcharge rates for high-income taxpayers and decriminalisation of certain penalties.

Meanwhile, Finance Minister Nirmala Sitharaman will present a record ninth consecutive budget on February 1, 2025 (Sunday). This will take Sitharaman closer to the record of 10 budgets that were presented by former Prime Minister Morarji Desai over different time periods.